iCharts Discussions

saikat · White Belt Joined: 31 Mar 2008 Posts: 317

It is a very testing time for TA. And in these kind of market it is of much importance that we not only monitor price but volume as well as OI also. I have tried to put some basic guidelines to help you to take your decisions more rationally.

Some simple guidelines for interpreting Volume and Open Interest:

If volume is relatively high while the market is going up and remains relatively low during corrections, the inference is that the market is in a strong uptrend, which should continue.

If volume is high while the market is going down and relatively light during upward retracements, then the market is weak with a continuing downward trend likely.

If both open interest and prices are increasing, then new buyers are being brought into the market with a strong technical picture unfolding. Expect the uptrend to continue.

If on the other hand, open interest is increasing while prices decline, short sellers have the upper hand in a technically weak market. As open interest is growing while prices decline, buyers are obviously the more aggressive party.

In the event of open interest declining while prices are also slipping, liquidation by long positions is the implication, therefore suggesting a technically strong market overall. In other words, the market is strong as open interest declining suggests no new aggressive shorts, as this would entail an increase in open interest.

When open interest is declining and prices are increasing, short covering is the most likely cause suggesting that overall the market is weak - i.e. attracting new buyers would be required for a technically strong market and consequently open interest would rise.

Regards,

Saikat

mayurnsk · Posted: Mon May 19, 2008 9:55 am Post subject:

Hi saikatnandy

You are rocking man Very Happy

.....expect many such posts from you. Just keep it up.

Nice and simple post from you once again Smile

Regards
Mayuresh Jahagirdar
Nasik
Maharashtra

SUNITbLL · White Belt Joined: 20 Feb 2009 Posts: 6

SIR
I READ THE ARTICLE ON VOLUME AND OPEN INTREST THE ARTICLE IS USEFULL BUT I CANNOT UNDERSTAND WHAT TIMEFRAME SHOULD TAKE TO CONSIDER OPENINTREST i.e end of the day or weekly or monthly AND LAST CONDITION AS OI INCREASES AND PRICE DECREASE WHAT SHOULD I DO
KINDLY IF YOU REPRESENT IN TABULAR FORM THEN IT IS BEST

amitsaraf21 · White Belt Joined: 20 Feb 2009 Posts: 76

Good statements and very much valid statements............

Challenge is to put these observations into our trading systems and strategies.

I strogly beleive right observation is one thing and making money out of it is different.

HAppy Trading

Amit

amitsaraf21 · White Belt Joined: 20 Feb 2009 Posts: 76

Good statements and very much valid statements............

Challenge is to put these observations into our trading systems and strategies.

I strogly beleive right observation is one thing and making money out of it is different.

HAppy Trading

Amit

rameshkg · White Belt Joined: 13 Dec 2008 Posts: 15

Dear Saikat,

I just gone through your below thread. It is wonderful information
which shared to us. Could you pls advise whether this study should
be done on EOD basis?

Thanks & Regards,
Ramesh kannan G

amitkbaid1008 · Yellow Belt Joined: 04 Mar 2009 Posts: 540

Dear Saikat

I have asked this question to so many people but failed to get any satisfactory answer till date. As I read your post hope you will be able to give a satisfactory answer so thanks in advance.

My questions is that when there is buyer or seller for every trade in stock market, how one can decide that a particular trade is short or long. For every short trade there is a corresponding long trade or short covering trade. Then how one can say that shorts are building.